Deciding to purchase a new car is a huge investment. This entails a huge sum of money which is why they will be spending their years attached to the same car for years to come; unless of course if you are wealthy.
There are two commonly used options when you decide to own a car: buying and leasing. Both are good option with its own advantage and disadvantages.
The Definitions
When you decide to buy a car, it means that you are either willing to pay the dealership on a monthly basis or pay them full straight on cash. Among the two, the most commonly used is the monthly kind of payment. This will help you ease the burden of paying a huge sum of money right then and there.
Leasing on the other hand is rental which paid over a longer period of time. When the contract expires, the car should be returned to the dealership unless you decide to extend it is up to you.
The Comparison
The similarities between the two lie in the money involved in the process. Both are to be paid on a monthly basis promptly in order to avoid any penalties that could be charged if not done so accordingly. In addition, they are also going to provide the dealer down payment which will be subtracted to the total amount of the car before the making the estimate of the monthly payment. In addition, interest rates are also present for both which people who pay cash right out avoids.
The Advantages and Its Drawbacks
The main difference between the two will be evident at the end of the contract. When you decide to buy the car, it is a done deal that at the end of your paying term the car will be entitled under your name. No one can decide what you are going to do with it.
When leasing the car, it is another story. Yes you will have a new car everytime you are done with the contract because you can choose another car once you return the one you are using back to the dealership. But one advantage is overshadowed by two drawbacks. One you are not able to do anything with the car as you please because you are to return it after the contract expires. And two, the contract may also have a mileage limit which when you reach it, the contract expires as well.
The Costs
The price tags are the same at the beginning, but the end term is what matters. When you lease a car, you pay the same amount that you do in a monthly basis with the risk of having to pay higher in order to own the car at the end of the contract. This is referred to as the buy-out price.
When opting to buy the car, you are to pay lesser in order to won the car with the same monthly installments. The drawback, which I do not see as one in today’s economy, is that you will be stuck to the same car for several years.
The Lifestyle
This is the determinant factor, along with the status of the person financially, that will ultimately help a person decide whether or not to lease or to buy. One that wants to own a new car every few years disregarding eh cost may opt to lease. While someone who wishes to stick with one car after several months of installments may decide to buy the car. Of course, again, I do not see this as a disadvantage in today’s economy.
The Function
Opting to buy the car may involve taking yourself into a car loan where a bank or a third party will be helping you pay the car on an installment basis. After how many years, the car will be yours. It is that easy. While doing a lease has a rental based format where you can only own the car when the contract expires and you are able to pay the buyout. The value that you are to pay this time is usually larger because of the depreciation that occurs over the extended period of time.
The Effect
A lease only requires the person to pay for the depreciation value of the on a monthly basis which also means that the down payment involved is also less. But the drawback is that you will need to pay a higher value if you want to own the car at the contract’s end.
Precaution
When under a lease contract, you are limited in many ways. It may require you to pay a higher insurance and the limitation of mileage causes you so much trouble that you may be hesitant in using it because once reach the limit, the contract is basically over. If you exceed, you are required to pay additional fees.
Considerations
Leasing may be best for drivers who love to have a new car after every couple of years and the costs are lower because you are only required to pay the depreciation every month. Also one who knows how many miles they will be using and a very careful driver. Once the car is damaged, you should be prepared to pay a huge amount.
